Traders and investors are struggling to find their footing in these uncertain times. The pandemic has encircled us with fear, and that is playing out with heavy selling in the markets. A guarded position will help you save your portfolio.
Two ways to save your portfolio
Buy index puts as protection, and keep cash – a lot of cash – on hand. This is something I’ve been advocating for a while now. Together, these strategies can help you weather the current storm.
You might wonder if it’s too late to protect your already-battered portfolio. It’s never too late.
I started adding put protection in earnest about a month ago. The markets had already started to roll over, and I told all Explosive Options members to protect themselves against the downside. In the past month, the Dow Industrials fell 8,000 points. The SPX 500 is down a staggering 25%, and the Russell 2K is down 30%.
We were able to offset some losses with some very fast and robust gains. Remember, markets take the escalator up and the window down. The gains made on the downside are sharp and quick.
If you’re deep in a cash position, you’re way ahead of the game. Traders don’t get rich from picking a bottom. They earn their wealth by patiently riding out trends and momentum. You are also likely a long-term investor. If that’s the case, this market qualifies as just another great buying opportunity. Don’t panic and keep moving forward with your trading strategy. There are so many fundamentally strong companies that can be scooped up for a relative bargain right now. Take advantage of it.
For everyone else: remain in a defensive position. The pandemic will end at some point, and markets will bounce back. Trying to guess when is a fool’s game. The unknowns remain deep and wide, and unfortunately, that is our reality for the time-being.